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Strategic Management

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Strategic Management Walter J. Ferrier The Paper Fight Two stacks of paper Anything goes Go! The Paper Fight What happened? – PowerPoint PPT presentation

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Title: Strategic Management


1
Strategic Management
  • Walter J. Ferrier

2
The Paper Fight
  • Two stacks of paper
  • Anything goes
  • Go!

3
The Paper Fight
  • What happened?

4
The Paper Fight
  • What happened?
  • Another round?

5
What is strategic management?
6
Strategic ManagementAction that Creates Value
Pazzos
Lynaghs Pub
Lynaghs Pub
7
Competitive Outcomes
Cokes Strategic Actions
Pepsis Strategic Actions
Rivalry
Industry Characteristics
Organizational Characteristics
8
Strategic Management Developing a set of
coordinated and integrated capabilities,
decisions, and actions required to achieve
competitive advantage
9
Action that Creates Value
Profit (Price Cost) x Qty.
10
Strategic Management in the News
  • Low price leaderPrice cutting
  • Differentiated playerUnique product or
    marketing
  • MARestructuringTurnaround
  • AllianceJoint venture
  • New international marketOff-shore manufacturing
  • New plants equipmentEfficient manufacturing
  • Market pioneerInnovator.New products

11
Where Does Strategy Occur?
CEO Board of Directors Top Management
  • Functional
  • Management
  • Marketing
  • Production
  • RD
  • Logistics
  • Acct./Fin.

Everyone else
Strategy is everyones job
12
Be strategy-savvy at Hitachi
Top Management
Dont let this be you.
?
13
Start-ups, small business, autonomous business
units
  • YOU will be a top officer, strategist,
    decision-maker
  • Pazzos vs. Joe Bolognas vs. Dominos
  • Lexington Brewing Co. vs. Anheuser-Busch
  • Johns Running Shop vs. Footlocker
  • Pannells Swim Shop vs. Dicks Sporting Goods

14
What do strategists do/think about?
  • Strive for competitive advantage / above-average
    returns
  • Assess external factors causing change
  • Develop internal factors that create advantage
  • Navigate stakeholder landscape
  • Strategic management process Five Stages

15
What else..?
  • External Stuff
  • Globalization
  • Technological change
  • Diverse and increasingly vocal and influential
    stakeholders
  • Wall Street
  • The Natural Environment
  • Internal Stuff
  • Building functional capabilities
  • Organizational culture
  • Leadership
  • Strategic HRM
  • Board of Directors
  • Efficiency

16
Levels of Strategy
  • Corporate Strategy
  • Business Strategy
  • Functional Strategy

Value can be created an any or all levels
17
Corporate Strategy
  • Decide scope/reach of the firm
  • In which businesses or industries do we compete?

GENERAL ELECTRIC
Aircraft Engines
Light Bulbs
Appliances
Power Generation
18
Corporate Strategy
PROCTER GAMBLE
Soaps
Food
Beverages
Paper Products
19
Corporate Strategy
PEPSI
Carbonated Beverages
Juices, Water, Sports drinks
Snack Foods
Fast Food
20
Corporate Strategy
COCA-COLA
Carbonated Beverages
Juices, Water, Sports drinks
21
Corporate Strategy
Hitachi
Automotive Systems
Power Systems
Consumer Products
Telecommunication Systems
22
Business Strategy
  • Since were in the XYZ industry, how do we
    compete?

Profit (Price Cost) x Qty.
  • Cost advantage
  • Size advantage
  • Differentiation advantage
  • Positional advantageNew market space
  • Bridge converging industries

23
Functional Strategy
  • Given our choice of corporate- and/or
    business-level strategy
  • Marketing
  • Production
  • RD
  • Human resource management
  • Finance
  • How do we coordinate and integrate business
    functions to carry out the strategy?
  • What functional changes or innovations are
    required to improve the strategy?

24
Strategy as Heuristic
25
Situation Analysis
26
Hierarchy of External Influences
  • Social
  • Economic
  • Technical
  • Global
  • Political/Legal

Remote Environment
Competitive Environment
Firm
  • Five Forces
  • Competitor Intelligence
  • Industry Structure
  • Strategic Groups
  • Political/Legal

27
Industry Vital Statistics
  • Industry scope How is the industry defined?
    What are its boundaries?
  • General Size, growth rate
  • Key Players Rivals, customers, suppliers,
    government agencies
  • Structure Fragmented vs. concentrated
    vertically integrated, etc.
  • Performance Profit levels, trends, distribution
    of, variability of

28
Life Cycle StageGrowth is Good
Growth Rate
Time
29
Innovation Cycle TimeSlow is good, unless
youre the one driving innovation
Growth Rate
Time
t1
t2
t3
30
Concentrated Structure
Fringe Players
Dominant Player
No. 2
Concentrated is good, if youre No. 1 or No. 2
or, if youre a smaller player in a protected
niche
31
Fragmented Structure
No Clear No. 2
Multiple Players
No Dominant Player
Fragmented is good, if youve got the best
strategy/technology
32
Porters Five-Forces of Industry Analysis
Threat of New Entry
() or (-) or no influence on...
Profit (P C) x Qty.
Intensity of Rivalry
Bargaining Power of Buyers
Bargaining Power of Suppliers
Threat of Substitute Products
33
Intensity of Rivalry Among Existing Competitors
Plays out in the following ways
Jockeying for strategic position

Price competition

Advertising wars -- Coke vs. Pepsi

Increasing consumer warranties or service

  • New product introductions Cheerios cereal (14
    types)
  • Regular Cheerios
  • Apple-Cinnamon Cheerios
  • Honey-Nut Cheerios
  • Frosted Cheerios
  • Three-Grain Cheerios
  • Cheerios with Berries (blueberry, strawberry,
    banana, mixed)
  • Yogurt Cheerios (vanilla or straw)
  • Fruity Cheerios (like Fruit Loops, only
    healthier)

34
Situation Analysis Summary Grid
PEST
Five Forces
35
Situation Analysis Auto Industry
?
?
?
PEST
?
?
?
?
?
Five Forces
?
?
36
Strategic Map
Strategic Dimension / Coordinate 2
Strategic Dimension / Coordinate 1
37
Strategic Map Beer (Pre-light / Pre-microbrew)
Dark/Full
Amber Regular
Light
Low Price
High Price
38
Strategic Map Beer (Current)
Guinness Blackened Voodoo Anchor Porter
Dark/Full
Killians Brown Lowenbrau Dark
Amber Bock Lowenbrau
Amber Regular
Sam Adams Bass Ale Pilsner Urquell
Killians Red Red Wolf
Bud Miller
Old Swill
Light
Miller Lite Bud Light
Milwaukees Best Light
Amstel Cardinal
Low Price
High Price
39
Strategic Map Beer-like Beverages?
Woodchuck Cider
Guinness Blackened Voodoo Anchor Porter
Dark/Full
Mikes Hard Lemon
Amber Regular
Sam Adams Bass Ale Pilsner Urquell
Killians Red Red Wolf
Smirnoff Ice
Bud Miller
New Strategic Dimension
Milwaukees Best Light
Light
Low Price
High Price
40
Resources and Capabilities
41
Competitive Advantage An Internal View
  • What is a resource?
  • What is a capability?
  • Whats the difference
  • Potential vs. Kinetic energy?
  • How do resources and/or capabilities contribute
    to competitive advantage?
  • Decisions
  • Actions and maneuvers
  • Force, endurance

42
Resources vs. Capabilities vs. Actions
43
Resources
  • Inputs into a firms value-producing stream
  • What a firm has
  • Capital equipment
  • Skills of employees
  • Brand names
  • Deep pockets
  • Strategic alliances

44
Capabilities
  • The ability to integrate resources to achieve a
    desired objective
  • What a firm can do
  • Quick introduction of new products
  • Preemptive price-cutting
  • Attention-grabbing advertising

45
Boxing Resources
  • Boxer 1
  • 66 tall
  • 233 lbs
  • Runs 24 mi./week
  • Eats 240g protein/day
  • Has 20/20 vision
  • Quick reflexes
  • Fought in 3 championship fights
  • Coached by Cuban national team coach
  • Boxer 2
  • 510 tall
  • 175 lbs.
  • Practices yoga
  • Likes to eat pasta and salad
  • Has 20/100 vision, must wear contacts
  • Just learned how to box
  • Prefers to coach himself

46
Boxing Capabilities
  • Boxer 1
  • Longer punching reach
  • Punches with great force, speed and power
  • Endurance to compete aggressively for 10-round
    match
  • Able to quickly move away from fierce attacks
  • Able to quickly see and interpret rivals hand,
    feet, and eye movements
  • Able to blend own and coachs experience for
    superior strategy and tactics
  • Boxer 2
  • ??
  • ??

47
Value Chain Analysis
To identify which resources and capabilities can
add value
Support Activities
Primary Activities
48
Support Activities
Inbound Logistics
Primary Activities
49
Support Activities
Inbound Logistics
Operations
Primary Activities
50
Support Activities
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
51
Support Activities
Marketing Sales
Outbound Logistics
Inbound Logistics
Operations
Primary Activities
52
Support Activities
Service
Inbound Logistics
Outbound Logistics
Marketing Sales
Operations
Primary Activities
53
Support Activities
Procurement
Service
Inbound Logistics
Outbound Logistics
Marketing Sales
Operations
Primary Activities
54
Support Activities
Technological Development
Procurement
Service
Inbound Logistics
Outbound Logistics
Marketing Sales
Operations
Primary Activities
55
Human Resource Management
Support Activities
Technological Development
Procurement
Service
Inbound Logistics
Marketing Sales
Outbound Logistics
Operations
Primary Activities
56
HQ TMT Firm Infrastructure
Human Resource Management
Support Activities
Technological Development
Procurement
Service
Inbound Logistics
Marketing Sales
Outbound Logistics
Operations
Primary Activities
57
HQ TMT Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement
Service
Inbound Logistics
Marketing Sales
Outbound Logistics
MARGIN
Operations
Primary Activities
58
Competitive Strategy
59
Business-level Competitive Strategy
  • Since were in the XYZ industry, how do we
    compete?

Profit (Price Cost) x Qty.
  • Cost advantage
  • Size advantage
  • Differentiation advantage
  • New market space
  • Bridge converging industries

60
Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Low Cost
Broad Target Market
Breadth of Competitive Scope
Narrow Target Market
61
Low-Cost Strategy - Operational Advantage
  • Dell finds it hilarious that HP and Sony fund
    researchers to come up with new ideas.

Steamrollered by Dell Newsweek, February 21,
2005
62
Value Chain and Low Cost Strategy
Firm Infrastructure
Human Resource Management
MARGIN
Technological Development
Procurement
Service
Inbound Logistics
Marketing Sales
Outbound Logistics
Operations
MARGIN
63
Inbound Logistics
Highly Efficient Systems to Link Suppliers
Products with the Firms Production Processes
Located in Close Proximity with Suppliers
Inbound Logistics
64
Operations
Relatively Few Management Layers to Reduce
Overhead
Firm Infrastructure
Effective Training Programs to Improve Worker
Efficiency and Effectiveness
Human Resource Management
MARGIN
Investments in Technology in order to Reduce
Costs Associated with Manufacturing Processes
Technological Development
Procurement
Frequent Evaluation Processes to Monitor
Suppliers Performances
Efficient Plant Scale to Minimize Manufacturing
Costs
Delivery Schedule that Reduces Costs
Small, Highly Trained Sales Force
Service
Inbound Logistics
Selection of Low Cost Transport Carriers
Products Priced to Generate Sales Volume
Outbound Logistics
Operations
Timing of Asset Purchases
Operations
MARGIN
Policy Choice of Plant Technology
Efficient Order Sizes
Organizational Learning
65
Outbound Logistics
Firm Infrastructure
Delivery Schedule that Reduces Costs
Human Resource Management
Selection of Low Cost Transport Carriers
MARGIN
Technological Development
Efficient Order Sizes
Procurement
Frequent Evaluation Processes to Monitor
Suppliers Performances
Delivery Schedule that Reduces Costs
Small, Highly Trained Sales Force
Effective Product Installations to Reduce
Frequency and Severity of Recalls
Interrelationships with Sister Units
Service
Outbound Logistics
Selection of Low Cost Transport Carriers
Products Priced to Generate Sales Volume
Outbound Logistics
Marketing Sales
MARGIN
National Scale Advertising
Efficient Order Sizes
Interrelationships with Sister Units
66
Marketing Sales
Firm Infrastructure
Small, Highly Trained Sales Force
Human Resource Management
Products Priced to Generate Sales Volume
MARGIN
Technological Development
Procurement
Global Scale Advertising
Service
Outbound Logistics
Marketing Sales
Inbound Logistics
Marketing Sales
Operations
MARGIN
67
Service
Firm Infrastructure
Effective Product Installations to Reduce Recalls
Human Resource Management
MARGIN
Technological Development
Procurement
Service
Service
Inbound Logistics
Outbound Logistics
Marketing Sales
Operations
MARGIN
68
Firm Infrastructure
Human Resource Management
MARGIN
Technological Development
Procurement
Procurement
Service
Procurement
Inbound Logistics
Outbound Logistics
Marketing Sales
Operations
MARGIN
Frequent Evaluation Processes to Monitor
Suppliers Performances
Systems and Procedures to Find the Lowest Cost
Products to Purchase Raw Materials
69
Firm Infrastructure
Human Resource Management
MARGIN
Technological Development
Technological Development
Procurement
Technological Development
Service
Easy-to-Use Manufacturing Technologies
Investments in Technology in order to Reduce
Costs Associated with Manufacturing Processes
Outbound Logistics
Inbound Logistics
Marketing Sales
Operations
MARGIN
70
Firm Infrastructure
Human Resource Management
Human Resource Management
MARGIN
Technological Development
Human Resource Management
Procurement
Consistent Policies to Reduce Turnover Costs
Effective Training Programs to Improve Worker
Efficiency and Effectiveness
Service
Outbound Logistics
Inbound Logistics
Marketing Sales
Operations
MARGIN
71
Firm Infrastructure
Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Firm Infrastructure
Technological Development
Cost Effective MIS Systems
Relatively Few Management Layers to Reduce
Overhead
Simplified Planning Practices to Reduce Planning
Costs
Procurement
Service
Marketing Sales
Outbound Logistics
Inbound Logistics
Operations
MARGIN
72
Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Cost Leadership
Broad Target Market
Differentiation
Breadth of Competitive Scope
Narrow Target Market
73
Differentiation Strategy Uniqueness Advantage
SOUTHWEST
74
Value Chain and Differentiation Strategy
Firm Infrastructure
Human Resource Management
MARGIN
Technological Development
Procurement
Service
Inbound Logistics
Marketing Sales
Outbound Logistics
Operations
MARGIN
75
Inbound Logistics
Superior handling of incoming raw materials to
minimize damage and improve the quality of the
final product
Inbound Logistics
76
Operations
Consistent manufacturing of attractive products
Rapid responses to customers unique manufacturing
specifications
Operations
77
Outbound Logistics
Accurate and responsive order processing
procedures
Rapid and timely product deliveries to customers
Outbound Logistics
78
Marketing Sales
Strong Coordination among functions in RD,
Marketing and Product Development
Extensive personal relationships with buyers
Premium Pricing
Marketing Sales
79
Service
Complete field stocking of replacement parts
Service
80
Technological Development
Technological Development
Strong capability in basic research
Investments in technol-ogies to produce highly
differentiated products
Coordination among RD, marketing and product
development
81
Support Activities
Human Resource Management
Compensation programs which encourage worker
creativity and productivity
Extensive use of subjective performance measures
Superior personnel training
82
Firm Infrastructure
Support Activities
Firm Infrastructure
A companywide culture emphasizing quality and
innovation
Highly developed Information Systems to better
understand customers purchasing preferences
83
Marketing/Innovation Advantage
84
Wheres the Differentiated Beef?
Bluegrass Meadows Beef
85
Still Perkin but a little
hurtin
86
Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Cost Leadership
Broad Target Market
Differentiation
Breadth of Competitive Scope
Narrow Target Market
Cost Leadership
Focused Differentiation
87
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89
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90
Other Strategy Heuristics
  • Corporate-level strategy
  • Management of portfolio of business units
  • Complementarities synergies
  • Mergers acquisitions
  • Organizational structure governance
  • Functional, product, or geographic organizational
    differentiation
  • Ownership strategic discretion
  • Alliances and joint ventures
  • International strategy
  • Foreign market entry modes
  • Operational standardization vs. national
    adaptations

91
Razor Trials
  • Try the razors
  • Compare
  • Evaluate
  • Discuss on Thursday

92
Strategic Management
  • Questions?
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